10 ways to save money on banking as a social enterprise
In 2015, the Federation of Small Businesses discovered that firms were paying an average of £2,500 every year in bank fees and charges.
That’s a significant investment, no matter the size of your business, but if you’re a social enterprise looking to get off the ground and make a mark in your chosen industry, such fees can be crippling.
Thankfully, there are number of tried-and-tested methods you can employ to cut the cost of banking as a social enterprise. We’ve picked out ten of the best:
1. Never settle for the first deal you find
Banks are getting increasingly smart with the packages they devise for new customers. There’ll be a free banking period (usually around twelve months), or some other incentive that is designed to draw you in immediately.
In fact, they do such a good job of piquing your interest that you may find yourself opting for the first deal you come across.
Avoid this at all costs – always, always shop around for banking deals and compare like-for-like; you’ll uncover numerous hidden clauses and disclaimers that will help you narrow down the field.
2. Check what fees you’ll be liable for
Most business bank accounts will come with a set of fees you’ll be duty-bound to pay under certain circumstances.
Before opening the account, ask for a full list of the fees and make sure you’re not going to be hit regularly because of the way you do business. For example, if you still receive a number of payments via cheque, you’ll need to find an account with a low fee for processing such transactions.
3. Variable or fixed interest rate for savings?
Some fixed rates will return far better interest for business savers, but you’ll often be asked to tie up your cash for longer to be eligible (anywhere between one to five years). If that isn’t likely to be a problem – go for it, but if your social enterprise needs immediate access to savings from time to time, a variable rate might be better suited.
4. Be weary of bonus rates
As noted in tip 1, banks will do all they can to lure new businesses into their grasp, and they’ll often resort to bonus rates that are almost too tempting to resist.
Resist you must, though – particularly if the small print confirms that the rate will drop considerably after a short amount of time.
Some bonus rates can be a good thing, and if there’s a get-out clause that enables you to take advantage of the higher rate before switching, it could be a very sensible move indeed.
5. Set a savings goal for your social enterprise
When first getting started as a social enterprise, the main goal is usually to stay afloat, cashflow-wise, but that doesn’t mean you can aim a little higher and set a target for saving.
That rainy day will arrive when you need to dig into cash reserves, therefore if you can promise to squirrel away a set amount each month, you’ll be preparing sensibly for a future that doesn’t have to rely on expensive overdrafts or credit cards.
6. Remember that headline rates don’t always tell the full story
A headline rate is just that – a tactic to grab your attention immediately and divert it from the small print.
If a business banking rate looks too good to be true, it probably is. Dig deeper into the Ts&Cs whenever you spot such rates.
7. Learn the difference between current and savings accounts
To save on banking fees and maximise the opportunity to earn a decent level of interest, you’ll need to know the difference between current and savings accounts.
The latter will usually pay a higher interest rate, but may tie your money up for long periods. Current accounts, meanwhile, may not pay high interest, but they might offer other perks such as overdrafts, insurance and quick access to cash.
Work out what will best suit your social enterprise.
8. Cover your assets
Try and find a business bank account that offers a favourable contents insurance bolt-on. You may have to forgo a percentage of interest to benefit from it, but knowing your assets are protected for a lower price because of your choice of bank is a great feeling.
9. Consider online-only
There’s something timeless and rather quaint about visiting the branch of your bank, but think about how often you’ll need to do so in reality.
Virtually every banking task can now be carried out online, so don’t discount online-only banks. Because they have lower overheads than their bricks-and-mortar brethren, they usually have some fantastic deals on the table, too.
10. Switch as often as you need to
There’s a common misconception that switching bank accounts is nothing but hassle, but that’s rarely the case nowadays. Most banks will switch your direct debits for you and signing up to a new account can usually be done relatively quickly online.
If you think you’re missing out on a better rate elsewhere – go get it!
You can’t run your social enterprise without a business bank account, but if you neglect the importance of shopping around and paying close attention to the small print, you’ll end up choosing one that will quickly eat into your profits.
Use our tips above to get your social enterprise off to the best possible financial start.